Hedging Programs Withstand Market Downturn
Milliman study of equity-linked guarantee programs shows positive results for those using hedging strategies SEATTLE, May 20 /PRNewswire/ -- Milliman, Inc., one of the premier global consulting and actuarial firms, today released results of a study measuring the effectiveness of hedging products that contain investment guarantees such as variable annuities. Hedging results from the 16 study respondents revealed few unanticipated losses and validated the efficacy of financial risk management programs, many of which have been implemented since the last significant market downturn.
"The demand for investment guarantee products arose out of the last major market downturn in late 2001," said Ken Mungan, who manages Milliman's financial risk management practice. "Since then, companies have implemented investment guarantees to protect them from market risk. This study shows that these guarantees have fared well in their first big test. Robust hedging programs are behaving as anticipated." The stability and predictability of hedging programs should provide comfort to insurers, especially in light of the recent market turbulence.
"More than half of respondents reported no unanticipated gain or loss during the recent period of market volatility," said study co-author Peter Sun. "Some reported an unanticipated gain, and most of those who did see losses experienced unanticipated declines of less than 10 basis points. Eleven of the surveyed companies had both foreign market and currency exchange exposure, so these results are global in nature. With most programs holding up well in the recent storm, it should come as no surprise that most of the surveyed companies are sticking to their original hedging strategies. Financial organizations continue to gain confidence in financial risk management as a way to protect their enterprise." The Milliman study documents the experience of the 16 respondent companies and provides a hypothetical yet typical example of how a block of variable annuities with guaranteed minimum withdrawal benefits behaved over the last several months. The complete results are now available at www.milliman.com.
About Milliman Milliman, whose corporate offices are in Seattle, serves the full spectrum of business, financial, government, and union organizations. Founded in 1947 as Milliman & Robertson, the company has 48 offices in principal cities in the United States and worldwide. Milliman employs more than 2,000 people, including a professional staff of more than 900 qualified consultants and actuaries. The firm has consulting practices in healthcare, employee benefits, life insurance/financial services, and property and casualty insurance. For further information visit www.milliman.com. Contact: Jeremy Engdahl-Johnson
CONTACT: Jeremy Engdahl-Johnson of Milliman, Inc., +1-206-504-5547, Web site: http://www.milliman.com/
2008-05-20 18:24:07 0367166 PRNEWSWIRE
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